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Anthem makes only small adjustment in rate increase after public scrutiny

News: 2014 Press Release

For Release: October 23, 2014

Media Calls Only: 916-492-3566

Email Inquiries: cdipress@insurance.ca.gov

Anthem makes only small adjustment in rate increase after public scrutiny

Rate increase still excessive and unreasonable

SACRAMENTO, Calif. - Anthem Blue Cross of California, after facing public scrutiny of its average 9.8 percent rate increase affecting 120,000 members, announced unilaterally yesterday that it is making a minor adjustment to its rate increase. Anthem told reporters its rate increase will be lowered to around 8 percent, despite already having notified small employers of the larger increase.

The Department of Insurance continues to find that Anthem's adjusted rate increase of approximately 8 percent is excessive and unreasonable. Anthem's reduction of the rate increase yesterday is an acknowledgement that the Department of Insurance was correct in finding Anthem's original rate increase excessive and unreasonable. But Anthem's small adjustment of the rate increase, to 8 percent, is not sufficient to make the increase reasonable. The Department of Insurance still concludes that only a 2.1 percent increase is justifiable based on Anthem's claims experience and other data provided by the company.

Yesterday, Insurance Commissioner Dave Jones announced that actuaries at the Department of Insurance had determined that Anthem's 9.8 percent average rate increase was excessive and unreasonable. In particular, the Department found that Anthem's rate increase was excessive due to Anthem's excessive profits, the inflated price trend in the rate filing, the failure to account for the better health status of the remaining members, and the unprecedented use of an accounting maneuver to reduce net income by $75.5 million and hide the level of profitability of the company.

In answering questions from reporters about the excessive rates, Anthem acknowledged that its own data indicated that a reduction of the increased rate was warranted and indicated they would be lowering the excessive rate they had already charged small businesses for October 1 coverage. Only after the commissioner called Anthem out publicly on its accounting maneuver that masks profits did they lower rates at all. Anthem's decision to back-pedal on its rate increase only after media scrutiny demonstrates that insurers have untethered control over rates. Neither the regulator, nor the affected small business owners know what rates Anthem is charging for these health insurance products even after Anthem's acknowledgement that they got it wrong the first time.

"Yesterday, we saw another example of why health insurers should not be able to set its own rates without first publicly justifying the rate and getting approval from a regulator, as is required in 35 other states," said Insurance Commissioner Dave Jones. "Although acknowledging that its original rate was too high and making a minor adjustment in the face of media interest, Anthem Blue Cross is still imposing an excessive and unreasonable rate increase, but there is nothing that I or anyone else can do about it until the law is changed."

Had Anthem revised its rate increase to the 2.1 percent requested by the Department of Insurance, its policyholders would have saved $33 million. This is the fourth time in two years that the Department of Insurance found Anthem charging an excessive and unreasonable rate increase on small employers in California.

California's insurance commissioner has had the authority, since voters passed Proposition 103 in 1988, to reject excessive rate hikes for auto, home and other property and casualty insurance, saving consumers over $100 billion. State and federal law does not provide the legal authority to reject excessive health insurance rate hikes, however.

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.